$A rebounds ahead of retail trade, RBA decision

The Australian dollar is more than two thirds of a US cent higher following gains on US share markets.

At 0700 AEDT on Tuesday, the currency was trading at 101.95 US cents, up from 101.25 US cents on Monday afternoon.

The Australian dollar dropped to an eight-month low of 101.16 US cents on Monday following sharp falls on local sharemarkets led by concerns about a possible slowdown in Chinese economic growth.

But Bank of New Zealand currency strategist Mike Jones said the currency drifted higher overnight before gaining steadily from around 0500 AEDT as US stocks rallied. Mr Jones said US stocks lifted on improved manufacturing data and positive comments from billionaire investor Warren Buffett.

"We had a very positive reading on the ISM manufacturing index for New York and also some comments from Warren Buffett that stock markets still offered some good value," he said.

"So, stocks have finished the session in a reasonably perky fashion and the Aussie dollar has risen in sympathy with that."

RETAIL TRADE, RBA AHEAD

Mr Jones said the market would be busy during Tuesday's local session, with official retail trade and current account figures to be released at 1130 AEDT and the Reserve Bank of Australia (RBA) to announce its monthly interest rate decision at 1430 AEDT.